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FDIC wants new ceiling on interest rates paid by weak banks

April 2nd, 2009 6:22 PM by Lehel Szucs

FDIC wants new ceiling on interest rates paid by weak banks

Trying to limit its losses amid mounting lender failures, the agency proposes a cap of 0.75 of a percentage point over the national average rate for banks with less-than-adequate capital.
By Tom Petruno
January 28, 2009
Savers have long been able to take advantage of the above-average interest rates that weak banks pay to attract deposits. But those days may soon be over.

The Federal Deposit Insurance Corp. on Tuesday proposed new limits on rates paid by banks that have less-than-adequate capital.

According to Bankrate.com, 11 banks, mostly small institutions, on Tuesday were offering rates above 2.3% on six-month CDs. The highest rate offered was 2.91%.

Faced with mounting lender failures, the FDIC is trying to limit its losses when it takes control of banks and honors its insurance commitment to savers. The agency insures up to $250,000 per customer, a limit that was raised from $100,000 last year.

Just before Pasadena-based IndyMac Bank failed in July, it was offering the highest rates in the nation on six-month and one-year certificates of deposit. IndyMac's six-month CD rate was 4.10%, compared with a national average of 2.23% at the time.

The FDIC had 154 banks on its list of undercapitalized institutions as of Sept. 30, out of a total of 8,300. The agency doesn't disclose the names of the banks.

The FDIC will take comments on its proposed changes for 60 days.

Posted in:General
Posted by Lehel Szucs on April 2nd, 2009 6:22 PM



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